Press & Policy

If the UK and Scottish governments are serious about tackling the cost of living, they must turn their attention to tackling the cost of doing business.

The connection between the two can sometimes get lost in the political debate. Ahead of the upcoming UK and Scottish budgets, calls from business for lower costs, tax reform or regulatory change are easily characterised as companies asking government for a handout.

It is a fair challenge, but one worth putting into context. As with households, businesses cannot absorb rising costs indefinitely. Eventually, the consequences appear elsewhere: in lower investment, fewer jobs or, increasingly, higher prices for customers. This should come as no surprise. For years, Scotland’s business community has warned about the cumulative burden of rising costs, with energy bills, business rates and the increasing cost of employment all putting pressure on firms across Scotland.

Our latest Quarterly Economic Indicator makes the link between business costs and household bills explicit. Over the next three months, almost three quarters of Scottish businesses expect to raise their prices.

For governments in both Edinburgh and Westminster which have made easing the cost of living a political priority, these findings should be a cause of significant concern.

Both governments have in recent months acted directly to reduce household bills and increase disposable incomes. But if, at the same time, the cost of producing goods and providing services continues to rise, businesses will increasingly have little option but to raise prices too.

Our latest findings demonstrate why that matters. For the first time in 2026, we have recorded a positive movement in business confidence.. At first glance, that is an encouraging development. But confidence is relative, and an improvement from a particularly difficult period should not be mistaken for a return to healthy trading conditions.

There is a distinction between signs of recovery and a booming economy. This becomes clearer when we look beyond headline improvement in confidence in our latest survey. Revenues, cashflow and profitability remain under pressure, while businesses continue to contend with substantial costs across wages, energy, fuel, and taxation.

These headwinds are even more stark when we look at individual sectors.

In construction, more than nine in ten firms told us they were experiencing pressure from labour costs. Some 83 per cent cited fuel costs – up by 21 percentage points in only three months and almost double the proportion recorded a year ago.

In retail, 64 per cent of businesses identified fuel as a cost pressure, compared with just 25 per cent a year earlier, while six in ten reported pressure from rising utility costs. Half expect to increase prices.

Manufacturing provides yet another warning. Six in ten manufacturers expect to increase their prices in the coming quarter, while not a single respondent expected to reduce them.

In Scotland’s vital tourism industry, almost six in ten businesses anticipate increasing prices.

Beyond the headline statistics, these results will have implications for communities across the country.

The pressures businesses face can influence everything from the cost of building a home to the price of a meal out, a hotel stay or everyday purchases on Scotland’s high streets.

That is why governments should resist the temptation to regard measures designed to improve business competitiveness as giveaways to companies. A more competitive economy benefits families and households too.

Both governments have practical measures at their disposal. At Westminster, reducing employer National Insurance contributions would ease one of the most significant costs facing businesses across the economy. Higher employment costs leave firms with less room to recruit, increase wages or invest, while adding to the pressure to pass costs on to customers. Easing that burden would give businesses greater flexibility to manage costs without further increasing prices.

At Holyrood, the Scottish Government’s commitment to reforming non-domestic rates is welcome, but businesses need relief from immediate cost pressures in the meantime. Addressing the cliff edges in the current system, particularly the £100,000 eligibility threshold, would help prevent firms facing sharply higher bills while simultaneously losing access to relief. Expanding Fresh Start relief would also encourage investment in vacant premises, helping to revitalise Scotland’s high streets.

None of this means businesses should be insulated from every cost or regulation. Good regulation is essential. Firms depend on functioning public services, infrastructure and skilled workers, all of which must be paid for. Responsible businesses also recognise their obligations to their employees, customers and communities.

However, there is little point in taking action intended to put money back into people’s pockets if rising costs elsewhere in the economy simply take it back through higher prices.

Conversely, policies which allow businesses to contain their costs can help make household incomes stretch further, while supporting the investment and employment on which a stronger economy depends. That is surely an outcome which should appeal to ministers of any political persuasion.

The strongest possible economy is not one in which government chooses between supporting businesses and supporting households. It is one which recognises that their fortunes are inseparable.

The latest findings offer some encouragement, but Scotland’s businesses continue to face significant pressures. Ministers now have an opportunity to address those pressures, and, in doing so, help deliver on one of their own biggest political priorities.

If they can reduce the pressures pushing up the cost of doing business, it will not only be Scotland’s employers who feel the benefit, but their voters too.

Charandeep Singh BEM is the Chief Executive of the Scottish Chambers of Commerce. This article was first printed in the Herald on 15 October 2026.